The most logical buyer of Leeuwin Metals’ (ASX: LM1) Marda Gold Project has increased its holding in the company to 11.46%, right as a resource upgrade has been delivered and development work programs have commenced, as LM1 seeks to get its flagship WA gold project back into production. Forrestania Resources (ASX: FRS) has recently acquired the Edna May mine for $300 million – swiftly actioning its plans to resume processing with a strategically curated assemblage of regional deposits. The $130/oz that FRS bid for Zenith Minerals (ASX: ZNC) and its 675koz at 1g/t Au resource is now in question, after a push from ZNC shareholders led the Takeovers Panel to make a declaration of unacceptable circumstances due to the Edna May transaction not being declared during the offer. LM1 is currently trading at $64.87/oz and the recent MRE upgrade has achieved a 378.6koz resource that is all on mining leases and with a total high grade component of 165.2koz at 1.5g/t Au. Marda is the same asset that Ramelius Resources (ASX: RMS) acquired for $13 million in 2018, when gold was just US$1,200/oz compared to US$4,600/oz now, before mining 143koz at 1.9g/t Au between 2019 and 2023 and processing it at Edna May before putting the mine on care and maintenance because the on-site resources needed a $300 million expansion. FRS has also awarded a $145 million mining contract for Johnson Range to MEGA Resources – LM1’s MOU development partner – so there is a lot of intermingling happening which is highly conducive to a value realisation event for LM1. Most of this MRE upgrade came from the higher grade component of Evanston, which rose to 115.4koz at 1.49g/t Au – up from 96.4koz at 1.52g/t Au. The Dugite prospect has made its debut with a modest 6.6koz at 1.15g/t Au, but has only been reported to 100m below surface and 40m below the bottom of the previously mined pit. LM1 is now focused on further resource growth and exploration targeting at the Golden Orb, Deception Hill and Mt King Targets. We attended RIU in Melbourne this week and noted a key point made by Lion Selection Group’s (ASX: LSX) Hedley Widdup that the most value accretive use of the swelling cash balances that major gold producers are determining how to deploy is to acquire development projects – many of which are still being significantly undervalued by the market.
Super high-grade rock chip samples were released from the Mt King prospect earlier this year, which is in the North section of Marda. It’s a spectacular target that is yet to have a resource defined, and presents an exciting dimension of upside that is not at all factored into this recent MRE upgrade. The results include 39.9g/t Au, 25.8g/t Au, 19.85g/t Au and 13.4g/t Au, which follow up on historical drilling assays of 15m at 7.47g/t Au from 120m and 4m at 7.27g/t Au from 70m, and are in an area with historical workings. The Red Boomerang and Deception Hill prospects are also now in focus after LM1’s assessment of Marda’s regional targets has revealed multiple significant intercepts that are also not included in this latest MRE update, with assays such as 24m at 1.79g/t Au from surface including 15m at 2.72g/t Au from 8m, 12m at 4.33g/t Au from 64m including 1m at 26.4g/t Au from 67m, and 10m at 2.41g/t Au from 50m including 1m at 15g/t Au from 51m. Golden Orb’s 25.7koz at 1.56g/t resource is also a high-grade and established prospect that will soon be drilled again to target key extensions that have a relatively high likelihood of hitting grades similar to its headline resource figure, and will be following up on intercepts from earlier in the year such as 11m at 1.4g/t Au from 176m, including 4m at 3.35g/t Au from 178m.
Marda Central now contains 5 prospects that have defined resources, including Python’s 41.3koz at 1.4g/t Au, Dolly Pot’s 24.1koz at 1.46g/t Au, Taipan’s 13.9koz at 0.86g/t Au, Goldstream’s 8.5koz at 1.1g/t Au and the new addition of Dugite’s 6.6koz at 1.15g/t Au. However, the most exciting sections of the area could be the untested ones – there are a total of 11 priority structural trends surrounding the existing pits that have been identified, with multiple high grade samples that occur along NNW striking quartz veins, each with significant strike and with just one prospect reaching 1.2km with samples up to an astounding 209g/t Au. These prospects add 3.7km of extremely high priority strike that all have the right structural setting and a litany of rock chips that also include 62.4g/t Au, 49.2g/t Au and 18.55g/t Au – in an area with known repeated small deposits. LM1 has the opportunity to break ground in these areas with RC drilling with a relatively low risk but genuinely high impact exploration campaign that has potential to drastically increase the mineralised profile of Marda Central.
FRS initially stormed onto LM1’s register with a 7.03% holding, and after acquiring RMS’ stake at $0.2043/share as a part of the Edna May acquisition to reach a 10.37% holding, the rapidly growing WA gold miner has increased its position again to 11.46%. LM1 is currently priced at a $28.26 million market cap while trading at $0.22/share, and with $3.7 million in cash – a $24.56 million enterprise value implies a $64.87/oz EV/Resource valuation, which would drop to $49.12 upon definition of a 500koz resource – which is a very plausible target for LM1. This already appears extremely attractive to the $130/oz that FRS would theoretically pay for ZNC – which is a price that could be forced to be increased once the Takeovers Panel makes its judgement and ZNC shareholders consider the offer with all available factors, namely the strategic value of the deposit to Edna May. FRS likely needs Marda regardless of whether it keeps the ZNC deal or not, but if it is forced to pay more or walk away – the timeline of a corporate action with LM1 could be fastracked. Ore from Marda was last mined and transported to the plant for processing in 2023, via haulage roads and from accessible pits that could rapidly resume production – and the economics of bringing Marda back into production at a gold price of US$4,600/oz would be enticing, not to mention defendable in modelling with the likes of Goldman Sachs seeing further upside from its US$4,900/oz end of year forecast.
The total resource inventory of LM1’s Marda Gold project can be seen below, broken up into the main North, Central and South target areas with the individual prospects contained within. Aside from the 10.9koz at 1.91g/t Au resource below the pit at Python, most ounces in the MRE are reported within a $6,500/oz (US$4,676/oz) pit shell and a 0.3g/t Au cut-off grade:
Source: LM1
The cross section of Evanston below depicts the resource block model and many of the extensional holes that LM1 drilled to deliver the MRE update:
Source: LM1
The plan map below shows Marda Central and the 5 key prospects that have defined resources, as well as some of the high priority targets in the surrounding area that have insanely high rock chips up to 209g/t Au and remain undrilled:
Source: LM1
LM1 has a clear path to 500koz and a deposit that is more crucial now than ever to a major West Australian gold mine that is being brought back into production by an aggressive regional acquirer, who knows it can both pay up for strategically located deposits and still make them value accretive in the current gold price environment – which is likely to persist into the future.
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Disclaimer: This article is for informational and marketing purposes only, and does not constitute financial advice or a recommendation to invest. All opinions expressed are our own. We may receive fees or other forms of compensation in connection with the publication of this content, and may own shares in any of the mentioned companies. Please do your own research and seek professional advice before making any investment decisions.